Financial Results for the Fiscal Year

TSE Code: 5938

Ended March 31, 2023 (IFRS)

(From April 1, 2022, to March 31, 2023)

LIXIL Corporation

April 28, 2023

Copyright © LIXIL Corporation. All rights reserved.

LIXIL TRANSITIONED TO IFRS FROM FYE2016

CHANGE IN PROFIT LEVEL STRUCTURE IS AS SHOWN

JGAAPBELOW

IFRS (LIXIL Financial Reporting)

Continuing operations

Net sales

Revenue

Cost of sales

Cost of sales

Gross profit

Gross profit

SG&A

SG&A

Operating profit

Core earnings (CE)

Non-operating income/expenses

Other income/expenses

Ordinary income

Operating profit

Extraordinary income/loss

Finance income/costs

Share of profit (loss) of investments accounted for using equity method

Profit before income taxes

Profit before tax

Profit from continuing operations

Discontinued operations

Profit for discontinued operations

Net profit attributable to

Profit attributable to

Non-controlling interests

Owners of the parent

Owners of the parent

Non-controlling interests

"Core earnings" in IFRS is equivalent to JGAAP's "Operating profit"

1

KEY HIGHLIGHTS

Summary of results for the fiscal year ended March 2023

Revenue and profits increased year-on-year for Q4 (3 months) FYE2023

• Cost increases caused by higher raw material prices and JPY depreciation were mitigated. Revenue and profits increased due to price optimization while increase of components costs and labor costs are realizing later.

• The pace of profitability improvement has slowed, due to higher fixed costs per unit sales as volumes declined on sluggish demand

• Impact of supply chain disruptions in Europe and inventory adjustment in the U.S. have been resolved from Q4

Revenue increased while profits declined for Q4 (12 months) FYE2023

  • Revenue increased due to price optimization implemented in April 2022
  • Japan: Profit declined due to the difference in timing of cost increases, including component costs, and price optimization
  • International: Profit declined due to cost increases caused by higher raw material prices, supply chain disruptions in Europe caused by the Ukraine crisis, as well as an increase in the COGS from logistics delays and inventory adjustments in the U.S.

2

KEY HIGHLIGHTS

Outlook for the fiscal year ending March 2024

Forecast for FYE2024

• Forecasting revenue of JPY1,530 billion and core earnings of JPY40 billion

• Forecasting annual dividend of JPY90 per share

Business environment and outlook

  • New housing starts expected to remain weak in the key markets including Japan
  • Renovation demand for insulation in Japan, continued strong overall demand in Middle East region and Asia-Pacific region
  • Higher sales of focused products is expected in Japan due to an improved competitive environment from Q2 FYE2024
  • Sluggish demand in international markets is expected to continue through H1 FYE2024 due to rising interest rates
  • Price optimization to cover increase of variable cost in COGS is expected to be implemented smoothly. Covering the higher burden of fixed cost per unit from decreased sales volumes by sales expansion of high-value-added products represents a challenge

3

KEY HIGHLIGHTS

Review of FYE2023 and Outlook for FYE2024(1)

FYE2023

Rapid depreciation of JPY and higher material costs were not fully reflected in sales prices during the period

Supply chain disruptions in Europe and the Americas and U.S. inventory adjustments delayed penetration of price optimization

Profitability has been gradually recovering since Q4

（Unit: JPY billion)

FYE2022

-47.5

-20.9

Result

+33.3

64.9

1-3Q:-23.5

-4.1

FYE2023

Q4: +2.5

Result

Q1-3:-37.2

Q1-3: +22.9

25.7

Q4: -10.3

Q4: +10.4

Inflation

Sales

Intl. business

Other

of raw

increase,

Supply chain

materials,

price

disruption in

components(2) optimization

Europe and

the Americas

FYE2024

Major drivers for profit growth:

① Price optimization in line with cost increases

② Normalization of supply chain distribution

③ Increasing demand for window remodeling

Shipments of higher-cost inventory from the previous period will also help improve profitability from Q2 onward

+5.2

-16.8

FYE2024

+53.0

Plan

-27.1

40.0

Inflation

Sales

Intl. business

Other

of raw

increase,

Improvement

Estimated increase

materials,

price

of supply chain

in SG&A expenses,

components(2)

optimization

mainly labor and

distribution costs

(1)

Please refer to p.26-27 and p.32 for Analysis on changes of core earnings by segment for FYE2023 results and FYE2024 plan

4

respectively.

(2)

Including FX impact

KEY HIGHLIGHTS

Management Direction(1)(2) - Updating the LIXIL Playbook

• Transform the management structure for sustainable growth and nurture an entrepreneurial culture

• Improve ROIC to 10% or more

• Improve core earnings margin aiming for 7.5%. Raise to 10% for mid-tolong-term

• Maintain Net debt/EBITDA at 3.5x or less, providing a stable foundation to support mid-tolong-term growth

• Aim for both sustainable corporate growth and creation of positive impact on society

Our

To Make Better Homes a Reality for Everyone, Everywhere

Corporate

Purpose

FOCUS

TRANSFORM

GROW

INNOVATE

Our

Divest Non-core

Tackle Inflation

Optimize

Grow Global

Embed

Develop

Strategic

Businesses and

and

Japan and

Water

Robust

New

Initiatives

Simplify

✔

Supply Chain

Drive New

Business

Environment

Core

Organization

Challenges

Growth

Strategy

Impact

Global

Water Conservation &

Diversity &

Our

Strategy

Sanitation

Environmental

Inclusion

& Hygiene

Sustainability

Foundation

Empower People to Deliver on Our Strategies and Create Value

  1. Page 25-34of LIXIL Integrated Report 2022 "Management Direction"https://ssl4.eir-parts.net/doc/5938/ir_material_for_fiscal_ym41/127637/00.pdf#page=26
  2. Page 6-7 of ESG Briefing Material in 2023 "ACHIEVING OUR PURPOSE THROUGH VALUE CREATION -UPDATING THE LIXIL PLAYBOOK" 5https://ssl4.eir-parts.net/doc/5938/ir_material_for_fiscal_ym33/133250/00.pdf#page=6

KEY HIGHLIGHTS

Focus on core businesses, respond to external changes, address environmental issues through our businesses, and foster new core businesses

Progress of Playbook Initiatives

TRANS

Tackle Inflation and Supply Chain Challenges

FORM

Challenges:Rise in material and logistics costs and supply chain disruptions

Response: Cost reduction through changes in materials and cost stability

Restructuring of inter-regional purchasing and establishment of procurement and production models within each region

Knockdown production and localization of downstream process

GROW

Optimize Japan and Drive New Growth

Challenges:

Transform into an agile, profitable and strong

business

Response:

Timely price optimization/digitalization of catalogs

Frequent restructuring of plants

Introduction of platform production system to create

flexible, small scale product development system

Expand renovation-focused lines, including water

products and insulation products (windows/walls)

Introduce environmentally friendly products and

businesses in all the product categories

Achieve constant cost reduction through

digitalization

GROW

Grow Global Water Business

: Build foundation to capture growth of international

Challenges

business

Response:

Strengthen high-value-added product lines especially

showers and new color palettes

Risk reduction through diversification of sales channels

Identification of Regional Business and Global Business

and classification of each strategy

Phase out commodity business

Establishment of strategic brand portfolio

Embed Robust Environment Strategy

INNO

VATE

Develop New Core

Challenges:Achieve both sustainable growth and creation of

Response:

positive impact on society

CO2

Reduction

Contribute to the reduction of 6.6million tons of CO2

through window remodeling business

Achieve recycled aluminum utilization ratio 70%, aiming

for 100% by 2031

Water Conservation

Mitigation of water pollution by discharge through SATO

Energy and water saving through Everstream Shower and

KINUAMI U

Circular Economy

Enhancement of end-to-end recycling throughout all

businesses with launch of Revia and PremiAL

6

PERFORMANCE HIGHLIGHTS

Revenue increased but profits decreased year-on-year

  • Revenue: JPY1,496.0 billion, up 5% year-on-year
    • Q4 (3 months) YoY: +1% in Japan and +14% in international markets (+3.4% excluding foreign exchange impact)
    • Q4 (12 months) YoY: +1% in Japan and +12% in international markets (-0.1% excluding foreign exchange impact)
  • Core earnings: JPY25.7 billion, down by JPY39.1 billion year-on-year
    • Q4 (3 months) YoY: -JPY0.6 billion in Japan, +JPY2.5 billion in international markets and -JPY0.3 billion for consolidation adjustment/other factors
    • Q4 (12 months) YoY: -JPY20.7 billion in Japan, -JPY20.9 billion in international markets and +JPY2.5 billion for consolidation adjustment/other factors
  • Profit for the year(1): JPY16.0 billion, down JPY32.6 billion year-on-year
    • Decreased primarily due to decrease in core earnings

(1) Profit for the year = Profit for the year attributable to owners of the parent

7

FYE2023 CONSOLIDATED BUSINESS RESULTS

Q4 (12 months)

Q4 (3 months)

FYE2022

FYE2023

Increase/

%

FYE2023

Increase/

%

JPY billion

decrease

decrease

(YoY)

(YoY)

Revenue

1,428.6

1,496.0

+67.4

+4.7%

372.2

+18.0

+5.1%

Gross profit

486.9

468.6

-18.2

-3.7%

116.2

+2.7

+2.4%

(%)

34.1%

31.3%

-2.8pp

-

31.2%

-0.8pp

-

SG&A

422.0

442.9

+20.9

+4.9%

111.4

+1.1

+1.0%

Core earnings (CE)(1)

64.9

25.7

-39.1

-60.3%

4.7

+1.6

+52.0%

(%)

4.5%

1.7%

-2.8pp

-

1.3%

+0.4pp

-

Profit for the year including

48.6

16.0

-32.6

-67.1%

5.0

-2.1

-30.0%

Discontinued Operations(2)

EPS (JPY)

167.21

55.54

-111.67

-66.8%

17.32

-7.11

-29.1%

EBITDA(3)

145.6

107.6

-38.0

-26.1%

25.1

+1.7

+7.1%

(%)

10.2%

7.2%

-3.0pp

-

6.7%

+0.1pp

-

  • CE margin: Declined by 2.8pp YoY (Improved by 0.4pp YoY for Q4 (3 months))
  • Gross profit margin: Declined by 2.8pp YoY (Declined by 0.8pp YoY for Q4 (3 months))
  • SG&A expenses: Increased by JPY20.9 billion YoY (Japan JPY0.2 billion increase, International JPY6.7 billion increase, forex effect JPY14.0 billion increase) mainly due to expanded sales activities and higher logistics costs. SG&A ratio remained at the same level as the previous year.

(1)

Equivalent to "Operating profit" of JGAAP

8

(2)

Profit for the year attributable to owners of the parent

(3)

EBITDA=Core earnings + Depreciation + Amortization

FYE2023 BUSINESS RESULTS BY SEGMENT

Revenue increased in all businesses, core earnings fell year-on-year from JPY depreciation and continued high component costs. LHT turned profitable in Q4 (3 months) due to price optimization.

Q4

(12 months)

Q4 (3 months)

Increase/decrease (YoY)

Increase/decrease (YoY)

New

FYE2022 FYE2023

due to

excluding FYE2023

due to

excluding

reporting

(1)

segment

segment

segment

segment

segments

JPY billion

change(2)

change

change(2)

change

862.2

915.3

+53.1

232.1

+17.1

LWT

Revenue

CE

76.6

47.3

-29.4

11.2

-0.9

LHT

Revenue

584.2

598.2

+14.0

+4.3

+9.7

143.9

+1.1

-0.5

+1.6

CE

31.7

19.4

-12.3

+1.2

-13.5

3.9

+2.8

+0.1

+2.6

Consolidation,

Revenue

-17.8

-17.5

+0.3

-1.2

+1.4

-3.8

-0.2

-0.4

+0.2

adj. & other

CE

-43.4

-40.9

+2.5

+0.1

+2.5

-10.4

-0.3

0.0

-0.3

LIXIL

Revenue

1,428.6

1,496.0

+67.4

372.2

+18.0

CE

64.9

25.7

-39.1

4.7

+1.6

Forex impact(3) Q4

12 months: Revenue +JPY56.8 billion, CE +JPY4.9 billion

Q4

3 months: Revenue +JPY12.3 billion, CE +JPY0.5 billion

(1) Please refer to "Notice Regarding Change in Reporting

(2)

Includes consolidation adjustments added by the change of

9

Segments" disclosed on July 29, 2022 for full-year and quarterly

(3)

reporting segments

results for FYE2022 in the new reporting segments

Forex translation effect gain(loss) from international subsidiaries

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LIXIL Group Corporation published this content on 28 April 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 28 April 2023 06:46:10 UTC.